Redefine Properties’ distributable income increased by a solid 6.1% to R1.7 billion in the six months to February 28, after the value of its property portfolio in South Africa and Poland increased over 3% to R100.4bn.
A slightly lower interim dividend of 20.27 (20.32) cents per share was declared by the group, which is one of the most actively traded REITS on the JSE.
But despite the first-half growth in income, the forecast for the year was conservative and unchanged at between 48 cents and 52 cents, and in line with last year. The dividend payout ratio for 2024 was anticipated to be between 80% to 90%.
The increase in portfolio value was largely due to the R1.8bn acquisition of Mall of the South in Johannesburg, expansion of logistics facilities in Poland, depreciation of the rand, and marginally offset by non-core asset sales, CEO Andrew König said yesterday.
He said in an online presentation that the “solid performance” was in spite of having to operate in “difficult times”, and there remained uncertainty when interest rates would decline which would boost property market fundamentals, and that the group had “stuck to what matters most: focusing on our strategic priorities” through the interim period.
And despite the first-half growth in distribution income, the forecast for the year was conservative and unchanged at between 48 cents and 52 cents, and in line with last year. The dividend payout ratio for 2024 was anticipated to be between 80% to 90%.
The local portfolio of retail, industrial and offices was valued at R62.4bn (R59.9bn), while the Poland assets were valued at R38bn (R36.9bn), König said in an online presentation.
He said prospects for the Poland economy were looking better than the rest of Europe, with GDP growth projected at 3% this year, and trading metrics for their retail and logistics assets in Poland were strong.
He said the focus going forward, in a sticky inflationary environment that might only see the benefits from interest rates cuts materialising in 2025 was continued conservative balance-sheet management, building a quality and diversified portfolio, transforming the group human capital for better creativity, accelerating new data and digital platforms, and embedding environmental social and governance precepts in all their operations.
Chief operating officer Leon Kok said the South Africa retail and industrial portfolio both reported substantial improvements in rental renewal reversions during the period, and while there was an occupancy “blip” in the industrial portfolio, due to a single tenant vacate at Cato Ridge which had since been released, and a vacate at Coega.
Chief financial officer Ntobeko Nyawo said the interest cover ratio had fallen to 2.2 times from 2.4 times but they were not “losing any sleep” over this, as it was above the 2 times covenant. All indications were that the top of the interest rate cycle had been reached, the business was strongly cash generative, while an acquisition had been the main reason for a slight increase in the loan-to-value.
In an effort to enter the rapidly expanding township market, Redefine raised funds through the sale of non-core assets to buy a stake in Pan Africa Mall in Alexandra, Johannesburg. The R1.8bn acquisition from the Atterbury Property Fund also entailed developing further retail on adjoining land, and further extending that land.
On the still oversupplied office market in South Africa, Kok said companies were continuing to make their return to physical office spaces and seeking high quality P and A grade space, which made up 95% of Redefine’s portfolio.
While the group reported slight deterioration in occupancy, Redefine’s office portfolio grew its net operating income-level by 4.1%, outperforming the group’s industrial portfolio.
Kok said Redefine had 41MW of installed Solar PV capacity across all property sectors in the country, the bulk of which was in retail space. Another 21MW was in progress and which would lift capacity in the next 12 to 18 months.
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